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AMPS - An Overview

There is a lot of fear and uncertainty within the import and export communities about AMPS, the Administrative Monetary Penalty System being implemented by Canada Customs on Oct. 7th, 2002. Some of this is generated by people who stand to benefit from companies overreacting to inaccurate characterizations of what exactly AMPS is.

So, let's dispel the myth:

You are not going to go to jail if you don't pay a consultant tens of thousands of dollars in fees to make sure you're "compliant".

At NoGlobalBorders, because we started as a self-clear software provider, we see ourselves as importer and exporter advocates and think you should have a balanced view of the intent of AMPS. The CCRA (customs) is finally enforcing rules that have, in fact, been in place for quite a while. While we're not apologists for the CCRA, and have some concerns about how AMPS will be consistently applied, we feel that the canny corporation can use AMPS as a catalyst to improve their import/export process and significantly reduce its costs.

What is AMPS?

Canada's trade laws and systems of duties and tariffs exist to help protect Canadian manufacturers from cheap overseas labour and to prevent dumping of goods below cost within Canada's borders. As long as importers in Canada properly declare what's being brought into the country and pay the proper duty and GST, the system works. However, for years Canadian importers and exporters have not been universally and consistently doing their part. Many importers and exporters were completely fulfilling their obligations, often by using a customs broker, and often despite the difficulties of shoddy shipping documentation and an incomplete understanding of a complex and enormous body of legislation and regulation. Even some companies that used a broker were making mistakes, simply because their brokers did not take the time to completely understand the nature of the goods that were being shipped across the border.

Unfortunately, although many corporations were doing their best to comply, there were (and are) still a significant number of companies who do not properly report goods coming into the country or, when they do, who either accidentally or deliberately misclassify their products to take advantage of lower rates of duty. This means that a competitor of yours may be paying significantly less for their raw materials or finished products, or may be able to export far more cheaply simply by not complying with CCRA regulations. This puts your organization at a competitive disadvantage before you even go to market with your goods and services. It is this competitive imbalance that AMPS is meant to address.

AMPS finally provides Canada Customs with a framework for assessing financial penalties to a documented set of customs infractions. As part of this program, CCRA has produced a schedule which affords them an objective basis to determine when there has been a contravention, and provides a very specific set of penalties. This schedule (available with other information about AMPS here), outlines every type of customs infraction that falls under AMPS and identifies the applicable penalties, which may range from $25.00 (for a first offense of a minor nature), up to $25,000 or 60% of the value of the shipment and/or criminal charges (for deliberate attempts to defraud or multiple serious infractions). These penalties apply in addition to any other penalties or fines that may be levied.

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Why Now?

Although September 11th has been cited as a catalyst for almost every new security and border initiative, the AMPS initiative actually predates the World Trade Center attacks. However, it coincidentally dovetails well with the many objectives of the 9/11-precipitated cross-border initiatives recently announced by US and Canadian authorities. The CCRA and the US Customs Service have limited (but increasing) personnel, and would rather allocate these limited resources to inspecting "suspicious" activity, rather than having to randomly inspect everyone. Because one of the principles of AMPS is that every customs officer will have access to your organization's complete trade history, the decision to inspect your particular shipments will be based on past AMPS contraventions. Simply, they can now focus their attention on organizations with a history of poor compliance. AMPS gives them a new tool that they can use to protect our borders and our manufacturing competitiveness.

In addition, globalization means that more than ever Canadians are buying from and selling to the world. Negotiators who develop trade agreements with other countries to ensure that our goods and products are competitive on world markets depend partly on StatsCan trade statistics. These statistics are only as good as the data used to generate them, and poor reporting by importers and exporters has the potential to greatly skew this data, leading to poorly negotiated trade pacts.

Finally, Canada has ambitious plans to help Canadian importers and exporters source and sell their products more easily on the world stage. Programs such as Customs Self-Assessment can reduce the onus on importers, allowing them to report monthly on their trade activity and introducing "Fast Lanes" at the border for participants, significantly reducing the administrative cost of bring goods into the country and improving delivery times. AMPS is the "stick" to CSA's "carrot", and companies who ensure compliance and have few AMPS penalties can benefit from an improved relationship with customs and a smoother CSA application process.

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What Does My Organization Need To Do?

Canada Customs has a useful "AMPS preparation checklist", which we've summarized here. For the entire list, check out their website here.

As the Importer, you are responsible for your compliance levels, regardless of whether or not you use a customs broker. With few exceptions, all AMPS penalties accrue to the importer, not the broker.

Look at your current customs-related systems, processes and documentation. Like your personal tax documentation, you need to keep all documentation related to your imports and exports for years. Could you produce documentation related to any one of your imports on demand? Canada Customs will be increasing its auditing activity in parallel with the AMPS rollout. Failure to be able to produce the original shipping documents and invoices as well as valid certificates of origin will result in fines. Have you sat with your broker, your traffic department, carriers, and other service providers and verified that you are classifying your goods properly and fulfilling your documentary requirements?

Ensure that you've got a process for reconciling your accounting, receiving, and purchasing departments' activity with your customs activity. What you declared as a shipment value should agree with what you paid. This is one of the major areas of investigation during a customs audit. Did you receive at your dock what you declared to customs and what you paid your vendor for?

Finally, you should assess your overall level of compliance, develop a plan for ensuring that you correct any shortcomings in your processes, documentation and systems, and establish a system for monitoring the ongoing effectiveness of your compliance efforts.

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How Can We Benefit From AMPS?

For years, many organizations have had no personal interaction with Canada Customs because they have outsourced all their customs responsibility to their broker. Generally, this has meant that the only time they have ever heard from Customs is when something has gone wrong. This is exactly the opposite of how NGB thinks companies should be interacting with Customs.

You should own the relationship with Customs, not your broker. Customs officials have a fair amount of latitude in assessing AMPS penalties, and developing a working relationship with your local customs officials can help them understand your compliance efforts, and help them determine if the mistake was a "one-off" mistake, or a systemic problem in your process. By being proactive in assessing your AMPS readiness and working with your local customs office to ensure high levels of compliance, you will benefit from their goodwill in a number of ways. You will likely get the benefit of the doubt both in their assessments of AMPS penalties, as well as during the dispute resolution process, which is also thoroughly set out in the AMPS documentation.

Finally, because AMPS has the potential for putting your organization in Customs' spotlight, a good AMPS compliance strategy can significantly prepare your organization for participating in Customs Self-Assessment and future customs initiatives. The opposite side of the coin is that a failure to prepare for AMPS means that you may hamstring your ability to benefit from those same programs, which will ultimately result in putting your organization at a competitive disadvantage.

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What Should We Do Next?

Firstly, don't panic.

You still have time to prepare for AMPS, and the CCRA's AMPS website is a great place to start. There is likely enough there to get you started in assessing your current compliance levels, and to kickstart the development of a compliance strategy. If you'd rather consult with someone to assist you in developing and implementing a dynamic compliance process, NoGlobalBorders can help. Our consulting professionals have decades of experience in helping Canadian companies ensure that they use "best-practice" processes and that they are proactive in evolving their international trade strategies. This should not require tens of thousands of dollars in investment

Secondly, take this seriously.

As we mentioned above, your organization will be liable for most of the penalties assessed under AMPS. If nothing else, ensure that your contract with your service providers transfers liability for mistakes to the provider, or otherwise protect yourself from bearing the direct costs of these penalties. Ultimately, however, the government will come after your organization for payment. The best protection you can get will come from educating your organization, your carriers and your vendors, and developing a compliance strategy.

Finally, use this as a catalyst to take control of your customs process.

Use the fact that you are finally having to understand how your organization gets goods into the country to improve your purchasing procedures, and to apply for programs like customs self-assessment. If you are self-clear, you should be able to generate valuable reports to significantly reduce your costs. Depending on your customs broker, you should have access to your trade data to make better decisions about sourcing your products.

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